The recently passed federal tax reform act provides for up to 86 Opportunity Zones (OZs) in Oregon. The Governor must designate these zones by March 21, 2018 (one month extension possible).
Persons (or corporations) could sell assets and defer for several years the 23.8 percent long term capital gains tax that is invested accordingly under the Act in Opportunity Zone business/property. The amount of gains subject to tax is reduced 10 percent for investments held for five years and another 5 percent after seven years. If investments are held for 10 years all taxable gains are wiped out.
All property that a qualified business owns or leases must be located inside the OZ and have been acquired after 12/31/17. The original use of OZ property needs to be by the fund/business, or the property must be “substantially improved” within 30 months after acquisition. OZs are limited to whole census tracts that meet the definition of “Low Income Community” (LIC). Oregon has 342 such LICs. The number of OZs allowed for each state is at least 25 but no more than 25 percent of total number of LICs which means a maximum of 86 zones in Oregon.
Business Oregon has called on Association of Oregon Counties, League of Cities and others to consult with them to help advise the governor on which LICs should be nominated for OZs. It appears that every county could be eligible for at least one of the 86 zones. Methods for prioritizing and choosing/eliminating LICs to inform potential nominations include but aren’t limited to:
- Local input
- Indicators of likely investments
- Presence of underserved groups
- Key opportunities for special housing or redevelopment projects
- Census data for population size and age, number of businesses, relative severity of economic conditions
Business Oregon is developing a website for this program which should be up by February 26 at www.oregon4biz.com/opportunity-zones. As we learn more we will be sharing with AOC members.
Contacts: Mike McArthur or Mike Eliason